Sri Lanka in $1.1-B currency swap with India

COLOMBO: Sri Lanka’s central bank received $1.1 billion from neighboring India Thursday as part of a currency swap agreement, in order to shore up its foreign reserves and ease pressure on the local currency.

The US dollars were injected from the Reserve Bank of India (RBI), the Central Bank of Sri Lanka said in a statement.

It said the latest injection was in addition to $400 million received in April under another RBI currency swap facility available to members of the South Asian Association for Regional Cooperation bloc.

“With the enhanced level of official reserves, the Central Bank of Sri Lanka expects that the exchange rate would stabilize in line with sound macroeconomic fundamentals and movements of other currencies of major trading partners,” it said.

The Sri Lankan rupee has depreciated 2.3 percent against the dollar so far this year and the country’s official reserves fell to $6.88 billion by the end of July, from a peak of $9.18 billion in August 2014.

This week, the central bank noted that historically low interest rates were encouraging more imports of consumer goods and cars.

The bank said it will monitor the development to ensure that credit went into productive sectors “while avoiding excessive expansion” to other areas.